21 Jul Junk Fees–A Profit Center for Your Mortgage Servicer

This weekend the New York Times published an article about the increased debt load carried by many Americans, and did a great job of explaining one of the primary reasons for the continuing mortgage and credit crisis, and why junk fees are increasing the cost of your home mortgage.

[B]ehind the big increase in consumer debt is a major shift in the way lenders approach their business. In earlier years, actually being repaid by borrowers was crucial to lenders. Now, because so much consumer debt is packaged into securities and sold to investors, repayment of the loans takes on less importance to those lenders than the fees and charges generated when loans are made.

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Mortgage lenders similarly added or raised fees associated with borrowing to buy a home â€” like $75 e-mail charges, $100 document preparation costs and $70 courier fees â€” bringing the average to $700 a mortgage, according to the Department of Housing and Urban Development. These â€œjunk feesâ€ have risen 50 percent in recent years, said Michael A. Kratzer, president of FeeDisclosure.com, a Web site intended to help consumers reduce fees on mortgages.

The problem is not only the disconnect between those making the loans and those relying on the loans being repaid, but on the profit incentive built into the mortgage servicing industry, which makes more money on bad loans than on good ones.

If you’ve missed a mortgage payment or two, you don’t need me to tell you about junk fees. If you’re trying to minimize those charges, I can offer no better advice than to be vigilant. I don’t mean just making your payments on time, either, though that is certainly the place to start. You may also need to follow up and make sure those payments are posted on time.

Review your statements for fees, and question any that don’t seem appropriate to you. And review your escrow statements, too. Don’t assume that it’s correct just because they say it is. Your mortgage company, and their mortgage servicer, are in it for the money. Don’t give them any more of yours than they deserve.